Long butterfly spread from options with strike prices

Assignment Help Financial Management
Reference no: EM13918832

A trader creates a long butterfly spread from options with strike prices of $60, $65, and $70 per share by trading a total of 60 option contracts (15 contracts at $60, 30 contracts at $65 and 15 contracts at $70). Each contract is written on 100 shares of stock.The options are worth $12, $14.5, and $19 per share of stock. Derive the profit of this position at maturity as a function of the then spot price.

Reference no: EM13918832

Questions Cloud

Develop the activity schedule for the project : Develop the activity schedule for the project. Does it appear reasonable that construction of the athletic complex could begin one year after the decision to begin the project with the site survey and initial design plans?
Component in a healthy visual arts ecology : ‘Sound business models are a necessary component in a healthy visual arts ecology and essential for most publicly funded organisations' (Royce, 2011, p. 3)
What must be the opportunity cost of capital : A stock sells for $30. The next dividend will be $3 per share. If the return on equity ROE is a constant 15% and the company reinvests 40% of earnings in the firm, what must be the opportunity cost of capital?
Biggest nursing service lines : Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service lines - the Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR b..
Long butterfly spread from options with strike prices : A trader creates a long butterfly spread from options with strike prices of $60, $65, and $70 per share by trading a total of 60 option contracts (15 contracts at $60, 30 contracts at $65 and 15 contracts at $70). Each contract is written on 100 shar..
Complete a correlation on the data : Complete a correlation on the data (StatTools: Summary Statistics/Correlation and Covariance/Correlation/Entries below the diagonal only).
Demonstrate an understanding of the materials : Assume the role of Marketing Manager. Select a product (good or service) that is sold in the United States and has sales opportunities in a foreign market. Apply your critical thinking skills and the knowledge you have acquired throughout this cou..
The cost of raising capital through retained earnings : The cost of raising capital through retained earnings is _____________ (a. less than, b. greater than) the cost of raising capital through issuing new common stock. The current risk-free rate of return is 3.8%. The market risk premium is 6.1%. D'Amic..
Periodic method for inventory : You are provided with the following information for Najera Inc. for the month ended June 30, 2015. Najera uses the periodic method for inventory.

Reviews

Write a Review

Financial Management Questions & Answers

  How many bonds will the firm have to issue

Acme Inc. plans to issue 10-year, zero-coupon bonds to finance its capital expansion. Acme wants to raise $50 million for the expansion. If the required return on the bonds is 7.4%, how many bonds will the firm have to issue?

  Future value of an annuity-saving for retirement

Your client is 35 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $9,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average ret..

  Why changing dividend policy will impact firm value

It can be argued that a firm’s dividend policy is irrelevant but that changes to dividend policy are relevant. Explain this argument by discussing what factors a firm should consider in setting its dividend policy and why changing dividend policy wil..

  First payment to provide the perpetuity payments

A perpetuity is to pay $500 on the first of each month from January through September, inclusive. No payments will be made in October, November, or December. This pattern of payments is to continue forever. Assuming the monthly effective interest rat..

  The most significant challenge to business success you see

in this weekrsquos reading nbspand learning activities you learned aboutthe increasingly competitive global economy.why

  Expected return on portfolio-expected returns on stocks

You own a portfolio that has $3,100 invested in Stock A and $4,200 invested in Stock B. Assume the expected returns on these stocks are 11 percent and 17 percent, respectively. What is the expected return on the portfolio?

  What is the value of martell minings stock

Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 8% pe..

  What is the mexican peso-singapore dollar cross rate

You are given the following quotes: U.S. dollar/Mexican Peso = 0.0605 U.S. dollar/Singapore Dollar = 0.756 U.S dollar/Chinese Yuan = 0.1306 What is the Mexican Peso/Singapore Dollar cross rate?

  Return on equity affected by use of financial leverage

Is the return on equity (ROE) affected by the use of financial leverage? Why does this result occur? Should Router choose the capital structure that maximizes its expected ROE? Explain.

  Monthly transactions-adjustments and financial statements

Moonlight Bay Inn is incorporated on January 2, 2010, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during ..

  Calculate the change in nii and nim

Calculate the change in NII and NIM. Is this uneven shift in rates more or less likely than a parallel shift? Suppose the bank converts $ 20,000 of RSLs to fixed rate liabilities during the year and interest rates remain constant. What would the bank..

  What is the required rate of return on the stock

Property, Inc’s stock pays $4.25 dividends per share and it is expected to pay the same amount indefinitely. The stock is currently selling for $59. What is the required rate of return on the stock?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd